Stay Safe. Tips on How to avoid fraudulent Fake Private Investors

Many borrowers prefer using commercial hard money lenders that they have on the list of their researched lenders. This is always essential in avoiding getting defrauded by a fake private investor.

last updated Tuesday, August 1, 2023
#Fake Private Investors #Red Flags for Fraud

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John Burson

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Many borrowers use mortgage brokers to ensure they get funding from a reputable source. However, many people despise using new commercial hard money lenders. They prefer using commercial hard money lenders that they have on the list of their researched lenders. This is always essential in avoiding getting defrauded by a fake private investor. 

A private money lender is a non-institutional company or even an individual that lends money. The commercial loan is occasionally secured by a printed paper document and a contract of trust to finance your real estate transaction. Private money lenders are primarily considered to be based on relationships than commercial hard money lenders. However, many consider private investors a nationwide hard money lender with an 8 to 13% rate.

Many people get cheated by bogus private money lenders who promise them low-interest rates on their loans and take their deposit money. They promise lower rates to act as an incentive or bait to borrowers. Most private commercial hard money lenders will appeal for a direct deposit of 1% of the loan deposited before releasing the loan. Therefore, you should be careful when choosing suitable commercial hard money lenders. You can fall prey to investment fraud even if you are successful and financially savvy.

Here are some steps to protect you from being defrauded by a fake private lender. Red flags for fraud: 

• Ask questions. Ask the lender for information like his attorney's name and contact details. You need to request reference information because many fake private money lenders tend to count on you as a borrower not to do some digging before you go into a deal with them. Fend them off by doing your research. Also, try to use the commercial hard money lenders in your state. Avoid using commercial hard money lenders not from your country, and get your lawyer.
• Ensure your attorney suggests that the following information be included and written in the contract; the deposit money should be held in escrow and released only when the private commercial hard money lenders release the loan. An escrow is a legal opinion whereby a third party has an asset or a financial tool on behalf of two individuals who are closing a deal. The escrow agent holds the funds until the instructions or obligations are achieved.
• Have your attorney draft a contract explaining all these steps and have you and your lender sign it.
• It would be best always to have the money transferred to your bank, not the lender's choice.
• If the lender is not a fraud, he will agree to all the above steps.

If the private money lender doesn't have a lawyer and wants the money transferred to his choice of bank, be sure, they are a fraud. Don't be greedy and get into the trap of the fake private commercial hard money lenders. Know what you want to look for and learn more about the different commercial hard money lenders types. Make sure you also know the types of fraudsters and the red flag that may signal investment fraud. It is a scam when someone communicates with you through a router from another country. Make sure to investigate the phone number.

 
 
 

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